The good news for the Detroit automakers is that they finally got part of the bridge loan they so desperately need. But if they thought getting the money was hard, now the hard part really begins.
General Motors and Chrysler face the tough task of having to bargain with all the stakeholders who must make sacrifices if these companies are going to truly restructure. And while they all may agree in principle that they have to give something up, they are going to fight like Hell to make sure everyone else gives up more than they do.

The problem with a bargaining situation like this is that if you have just one holdout the whole deal can fall apart. All it takes is one creditor to say that they want their bill paid in full, instead of taking something less than that, and then no one else will be willing to make any sacrifice.

And make no mistake about it, everyone's going to have to sacrifice: management, labor, creditors, bondholders, shareholders, dealers, and suppliers. It's going to be painful for everyone involved, but that's what it's going to take to save these two corporations.

John McElroy is host of the TV program "Autoline Detroit" and daily web video "Autoline Daily". Every week he brings his unique insights as an auto industry insider to Autoblog readers.

"...make no mistake about it, everyone's going to have to sacrifice.
Let's start with creditors. General Motors has some $60 billion in debt, and during the Congressional hearings Senators and Congressmen made it clear that they would like to see GM get rid of at least $40 billion of that. But how? In some cases, GM will be able to convince some creditors to take less than what they are owed. "Better to get something than nothing," will be their line of argument. In other cases GM may have to pay off that debt with stock, instead of cash.

Bondholders may be told they're not going to get the kind of interest payments they've been expecting. Shareholders are going to see the value of their shares diluted as the company prints up more stock to pay off its debts. Some analysts say GM stock could drop to under a dollar a share, or maybe get wiped out completely.

Thousands of dealers are going to have to close. Some are going to see the brands that they sell simply get shut down, like Hummer, Saab, and Saturn. If they're lucky those brands will be sold off to some other car companies that will keep them going. In many large metropolitan markets the number of dealers is going to get pared down significantly. This is going to be very tricky for both GM and Chrysler because dealer franchise laws are very much skewed in favor of dealers. It may take a car Czar with special legal authority to help GM and Chrysler maneuver through this legal minefield.

Top management is going to take a pay cuts. The CEOs will earn only a dollar a year until the government money is paid back. Executive vice president's will see their cash compensation cut 50%, and see their salaries cut by roughly 30% on top of that.
"Even though the UAW has made many concessions, like agreeing to suspend the Jobs Bank, it still has a long way to go.

Even though the UAW has made many concessions, like agreeing to suspend the Jobs Bank, it still has a long way to go. Let's start with paid time off. UAW members average 42 paid days off a year. That includes five weeks of vacation and 17 holidays. In a government led restructuring I'd expect this to get chopped back to about 20 paid days off.

UAW workers also get up to 52 weeks of supplementary unemployment benefits. This pays them on top of any unemployment money they get from the state if they are laid off. And the Big Three pay those SUB benefits. Look for the SUB benefits to get axed.

UAW workers get bonuses throughout the life of the contract ranging from $2000-$3000 per year. In total they will get an additional $13,000 over the life of the contract. Retirees and their spouses also get bonuses totaling an average of $2300. It seems unlikely they'll continue getting those bonuses when taxpayers are footing the bill.

By the end of the contract UAW workers involved in General assembly will earn $28.85 an hour. Skilled workers will earn $33.56 an hour. While there is a provision to hire new workers starting at $14 an hour that only applies to non-core workers. Look for all wages to be chopped down to what the transplants pay.

It truly is tragic to see honest, hard-working employees and stakeholders have to give up so much of their livelihood. But that's what happens when you turn to taxpayers to foot the bill.

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